Efficiency of Peruvian Airports: Does the PPP Framework Make a Difference?

Study by Victor Chang and Beatriz Tovar

This paper examines whether the use of Public-Private Partnerships (PPPs) have improved the economic performance of Peruvian regional airports.  PPPs have been used since the early 2000s for the purpose of improving airport infrastructure which is crucial in the Peruvian context.  This is because land connectivity in Peru is limited and challenging due to the extremely rugged geography.  In addition, the development of airport infrastructure is vital if Peru is to realise its significant potential as a tourism destination.

Between 1943 and 1992, the management of airport infrastructure and the provision of services at Peruvian airports were carried out by the national company CORPAC.  In 1992, however, a process of airport reform aimed at introducing competition and privatisation was initiated.  The reforms established that CORPAC would provide aeronautical services throughout the national airport network but would only run airport services at non-concessioned airports.

A series of modernization reforms involving the granting of airport concessions was launched in the 2000s to encourage private investment and improve the quality and safety of airport operations.  The airport concession process was carried out in three stages.

The privatization process began in 2001 with the tendering of the country's main airport, the Jorge Chavez International Airport, to the Lima Airport Partners S.A. (LAP). Subsequently, in 2006, the first group of regional airports, comprising twelve airports in the north and centre of Peru, was concessioned to Aeropuertos del Perú S.A. (ADP), and in 2011, the second group of regional airports, comprising five airports in the south, was concessioned to Aeropuertos Andinos del Perú S.A. (AAP). The concession process for these regional airports was based on a PPP agreement, in which the government and the private operator share the construction and revenue risks.

The main aim of this paper is to assess and compare the efficiency of Peruvian regional airports in order to evaluate whether the reform process has improved their technical efficiency.  By definition, technical efficiency means the factors of production are used efficiently to maximise outputs and minimise costs. The paper also seeks to identify possible technological differences among these airports.